IDEAS home Printed from https://ideas.repec.org/p/hhs/osloec/2002_034.html
   My bibliography  Save this paper

Market power in the market for greenhouse gas emissions permits - the interplay with the fossil fuel markets

Author

Listed:
  • Hagem, Cathrine

    (Dept. of Economics, University of Oslo)

  • Mæstad, Ottar

    (Institute for Research in Economics and Business Administration (SNF), Bergen)

Abstract

Implementation of the Kyoto Protocol is likely to leave Russia and other Eastern European countries with market power in the market for emission permits. Ceteris paribus, this will raise the permit price above the competitive permit price. However, Russia is also a large exporter of fossil fuels. A high price on emission permits may lower the producer price on fossil fuels. Thus, if Russia coordinates its permit market and fossil fuel market policies, market power will not necessarily lead to a higher permit price. Fossil fuel producers may also exert market power in the permit market, provided they conceive the permit price to be influenced by their production volumes. If higher volumes drive up the permit price, Russian fuel producers may become more aggressive relative to their competitors in the fuel markets if the sale of fuels is coordinated with the sale of permits. The result is reversed if high fuel production drives the permit price down.

Suggested Citation

  • Hagem, Cathrine & Mæstad, Ottar, 2003. "Market power in the market for greenhouse gas emissions permits - the interplay with the fossil fuel markets," Memorandum 34/2002, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2002_034
    as

    Download full text from publisher

    File URL: http://www.sv.uio.no/econ/english/research/unpublished-works/working-papers/pdf-files/2002/Memo-34-2002.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Malueg, David A., 1990. "Welfare consequences of emission credit trading programs," Journal of Environmental Economics and Management, Elsevier, vol. 18(1), pages 66-77, January.
    2. Robert W. Hahn, 1984. "Market Power and Transferable Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(4), pages 753-765.
    3. Christoph Bohringer, 2002. "Climate Politics from Kyoto to Bonn: From Little to Nothing?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 51-71.
    4. Nils-Henrik Mørch von der Fehr, 1993. "Tradable emission rights and strategic interaction," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 3(2), pages 129-151, April.
    5. Misiolek, Walter S. & Elder, Harold W., 1989. "Exclusionary manipulation of markets for pollution rights," Journal of Environmental Economics and Management, Elsevier, vol. 16(2), pages 156-166, March.
    6. Eftichios Sartzetakis, 1997. "Tradeable emission permits regulations in the presence of imperfectly competitive product markets: Welfare implications," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 9(1), pages 65-81, January.
    7. Severin Borenstein, 1988. "On the Efficiency of Competitive Markets for Operating Licenses," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(2), pages 357-385.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. HAGEM Cathrine & KALLBEKKEN Steffen & MÆSTAD Ottar & WESTSKOG Hege, 2010. "Simultaneous Market Power for Complementary Goods: Gas and Emission Permit Exports," EcoMod2003 330700066, EcoMod.
    2. Cathrine Hagem & Steffen Kallbekken & Ottar Mæstad & Hege Westskog, 2006. "Market Power with Interdependent Demand: Sale of Emission Permits and Natural Gas from Russia," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(2), pages 211-227, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eftichios Sartzetakis, 2004. "On the Efficiency of Competitive Markets for Emission Permits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 27(1), pages 1-19, January.
    2. Harrie A.A. Verbon & Cees A. Withagen, 2004. "Tradable emission permits in a federal system," Economic Working Papers at Centro de Estudios Andaluces E2004/83, Centro de Estudios Andaluces.
    3. Andreas Löschel & Zhong Zhang, 2002. "The economic and environmental implications of the US repudiation of the kyoto protocol and the subsequent deals in Bonn and Marrakech," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(4), pages 711-746, December.
    4. Requate, Till, 2005. "Environmental Policy under Imperfect Competition: A Survey," Economics Working Papers 2005-12, Christian-Albrechts-University of Kiel, Department of Economics.
    5. Hagem, Cathrine & Maestad, Ottar, 2006. "Russian exports of emission permits under the Kyoto Protocol: The interplay with non-competitive fuel markets," Resource and Energy Economics, Elsevier, vol. 28(1), pages 54-73, January.
    6. Hatcher, Aaron, 2012. "Market power and compliance with output quotas," Resource and Energy Economics, Elsevier, vol. 34(2), pages 255-269.
    7. Christoph BOhringer & Andreas LOschel, 2003. "Market power and hot air in international emissions trading: the impacts of US withdrawal from the Kyoto Protocol," Applied Economics, Taylor & Francis Journals, vol. 35(6), pages 651-663.
    8. Rubin, Jonathan & Leiby, Paul N. & Greene, David L., 2009. "Tradable fuel economy credits: Competition and oligopoly," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 315-328, November.
    9. Stavins, Robert, 2004. "Environmental Economics," RFF Working Paper Series dp-04-54, Resources for the Future.
    10. Beat Hintermann, 2011. "Market Power, Permit Allocation and Efficiency in Emission Permit Markets," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 49(3), pages 327-349, July.
    11. Sang-Ho Lee & Sang-Ha Park, 2005. "Tradable Emission Permits Regulations: The Role of Product Differentiation," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 4(3), pages 249-261, December.
    12. Sartzetakis, Eftichios S., 1994. "Permis d’émission négociables et réglementation dans des marchés de concurrence imparfaite," L'Actualité Economique, Société Canadienne de Science Economique, vol. 70(2), pages 139-158, juin.
    13. Giuseppe De Feo & Joana Resende & Maria-Eugenia Sanin, 2012. "Optimal Allocation Of Tradable Emission Permits Under Upstream–Downstream Strategic Interaction," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 1-23.
    14. Robert W. Hahn & Robert N. Stavins, 2011. "The Effect of Allowance Allocations on Cap-and-Trade System Performance," Journal of Law and Economics, University of Chicago Press, vol. 54(S4), pages 267-294.
    15. Sonia Schwartz & Hubert Stahn, 2014. "Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco-Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 16(1), pages 69-95, February.
    16. Damien Sans & Sonia Schwartz & Hubert Stahn, 2015. "On Abatement Services: Market Power and Efficient Environmental Regulation," Working Papers halshs-01182200, HAL.
    17. Aatola, Piia, 2013. "Putting a Price on Carbon – Econometric Essays on the European Union Emissions Trading Scheme and its Impacts," Research Reports P62, VATT Institute for Economic Research.
    18. Mehdi Fadaee & Luca Lambertini, 2015. "Non-tradeable pollution permits as green R&D incentives," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 17(1), pages 27-42, January.
    19. Makoto Tanaka, 2012. "Multi-Sector Model of Tradable Emission Permits," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 51(1), pages 61-77, January.
    20. Sovacool, Benjamin K., 2015. "The political economy of pollution markets: Historical lessons for modern energy and climate planners," Renewable and Sustainable Energy Reviews, Elsevier, vol. 49(C), pages 943-953.

    More about this item

    Keywords

    Climate policy; gas; market power; emission permits;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:osloec:2002_034. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mari Strønstad Øverås (email available below). General contact details of provider: https://edirc.repec.org/data/souiono.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.